UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC  20549





FORM
10-Q





x
            Quarterly
      Report Pursuant to Section 13 or15(d)
      of the Securities Exchange Act of 1934
              
              For
      the period ended November 30, 2009




o
            Transition
      report Pursuant to Section 13 or15(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
              State
      or other jurisdiction of
                Incorporation
      or organization)
            
            13-2635899
              (I.R.S.
      Employer Identification No.)





400 Oser
Avenue, Hauppauge, NY  11788





(Address
of principal executive offices)





631-231-0333





(Registrant’s
telephone number)








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





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





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).  o  Yes   o  No (Registrant
not subject to requirement)





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





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





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





As of
December 31, 2009, there were 4,050,488 shares of common stock, par value $.01
per share, issued and outstanding.








Page
1




TSR, INC.
AND SUBSIDIARIES


INDEX





PagePart
      I.
            Financial
      Information:
            NumberItem
      1.
            Financial
      Statements:Condensed
      Consolidated Balance Sheets –November
      30, 2009 and May 31, 2009
            3Condensed
      Consolidated Statements of Income –For
      the three months and six months ended November 30, 2009 and
      2008
            4Condensed
      Consolidated Statements of Equity –For
      the six months ended November 30, 2009 and 2008
            5Condensed
      Consolidated Statements of Cash Flows –For
      the six months ended November 30, 2009 and 2008
            6Notes
      to Condensed Consolidated Financial Statements
            7Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results
      of Operations
            11Item
      4T.
            Controls
      and Procedures
            18Part
      II.
            Other
      Information
            18Item
      6.
            Exhibits
            18Signatures
            
            18








Page
2








Part
      I.
            Financial
      Information
              Item
      1. Financial Statements





TSR, INC.
AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


ASSETS
            
            November
              30,
              2009
            
            
            May
              31,
              2009(Unaudited)
            
            
            (Note
      1)Current
      Assets:Cash
      and cash equivalents
            
            $
            4,310,110
            
            
            $
            4,075,213Marketable
      securities
            
            
            3,514,813
            
            
            
            4,509,346Accounts
      receivable, net of allowance for doubtful accounts of $202,000 and
      $302,000
            
            
            7,201,960
            
            
            
            6,345,374Other
      receivables
            
            
            15,668
            
            
            
            20,580Prepaid
      expenses
            
            
            54,313
            
            
            
            72,429Prepaid
      and recoverable income taxes
            
            
            134,128
            
            
            
            101,791Deferred
      income taxes
            
            
            91,000
            
            
            
            133,000Total
      Current Assets
            
            
            15,321,992
            
            
            
            15,257,733Equipment
      and leasehold improvements, net of accumulated depreciationand
      amortization of $425,050 and $415,963
            
            
            12,312
            
            
            
            19,115Other
      assets
            
            
            49,653
            
            
            
            49,653Deferred
      income taxes
            
            
            59,000
            
            
            
            61,000Total
      Assets
            
            $
            15,442,957
            
            
            $
            15,387,501LIABILITIES
      AND EQUITYCurrent
      Liabilities:Accounts
      and other payables
            
            $
            252,449
            
            
            $
            274,284Accrued
      expenses and other current liabilities
            
            
            1,170,755
            
            
            
            1,247,355Advances
      from customers
            
            
            1,423,740
            
            
            
            1,447,740Total
      Current Liabilities
            
            
            2,846,944
            
            
            
            2,969,379Stockholders’
      Equity:Preferred
      stock, $1 par value, authorized 1,000,000 shares; none
    issued
            
            
            —
            
            
            
            —Common
      stock, $.01 par value, authorized 25,000,000 shares; issued 6,228,326
      shares
            
            
            62,283
            
            
            
            62,283Additional
      paid-in capital
            
            
            5,071,727
            
            
            
            5,071,727Retained
      earnings
            
            
            20,660,778
            
            
            
            20,517,70725,794,788
            
            
            
            25,651,717Less:
      Treasury stock, 2,177,838 shares, at cost
            
            
            13,251,231
            
            
            
            13,251,231Total
      TSR, Inc. Stockholders’ Equity
            
            
            12,543,557
            
            
            
            12,400,486Noncontrolling
      Interest
            
            
            52,456
            
            
            
            17,636Total
      Equity
            
            
            12,596,013
            
            
            
            12,418,122Total
      Liabilities and Equity
            
            $
            15,442,957
            
            
            $
            15,387,501





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


Page
3


TSR, INC.
AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF INCOME


For The
Three Months and Six Months Ended November 30, 2009 and 2008


(UNAUDITED)











Three
      Months Ended
            
            
            Six
      Months EndedNovember
      30,
              2009
            
            
            November
      30,
              2008
            
            
            November
      30,
              2009
            
            
            November
      30,
              2008Revenue,
      net
            
            $
            9,340,341
            
            
            $
            11,536,160
            
            
            $
            18,432,643
            
            
            $
            23,685,980Cost
      of sales
            
            
            7,654,462
            
            
            
            9,467,256
            
            
            
            15,100,963
            
            
            
            19,495,076Selling,
      general and administrative expenses
            
            
            1,516,003
            
            
            
            1,695,928
            
            
            
            3,042,045
            
            
            
            3,495,5749,170,465
            
            
            
            11,163,184
            
            
            
            18,143,008
            
            
            
            22,990,650Income
      from operations
            
            
            169,876
            
            
            
            372,976
            
            
            
            289,635
            
            
            
            695,330Other
      income (expense):Interest
      and dividend income
            
            
            14,176
            
            
            
            34,969
            
            
            
            32,472
            
            
            
            102,266Unrealized
      gain (loss) on marketable securities, net
            
            
            (896
            )
            
            
            (7,256
            )
            
            
            2,784
            
            
            
            (7,504
            )Income
      before income taxes
            
            
            183,156
            
            
            
            400,689
            
            
            
            324,891
            
            
            
            790,092Provision
      for income taxes
            
            
            82,000
            
            
            
            165,000
            
            
            
            141,000
            
            
            
            330,000Net
      income
            
            
            101,156
            
            
            
            235,689
            
            
            
            183,891
            
            
            
            460,092Less:
      Net income attributable to noncontrolling interest
            
            
            (21,463
            )
            
            
            (15,530
            )
            
            
            (40,820
            )
            
            
            (24,883
            )Net
      income attributable to TSR, Inc.
            
            $
            79,693
            
            
            $
            220,159
            
            
            $
            143,071
            
            
            $
            435,209Basic
      and diluted net income per TSR, Inc. commonshare
            
            $
            0.02
            
            
            $
            0.05
            
            
            $
            0.04
            
            
            $
            0.10Weighted
      average number of basic and diluted common shares
    outstanding
            
            
            4,050,488
            
            
            
            4,277,128
            
            
            
            4,050,488
            
            
            
            4,420,957








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














Page
4




TSR, INC.
AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF EQUITY


For
The Six Months Ended November 30, 2009 and 2008


(UNAUDITED)








Shares
      of
              common
              stock
            
            
            Common
              stock
            
            
            Additional
              paid-in
              capital
            
            
            Retained
              earnings
            
            
            Treasury
              stock
            
            
            Non-
              controlling
              Interest
            
            
            Total
              equityBalance
      at May 31, 2008.
            
            
            6,228,326
            
            
            $
            62,283
            
            
            $
            5,071,727
            
            
            $
            20,663,925
            
            
            $
            (12,031,301
            )
            
            $
            53,533
            
            
            $
            13,820,167Net
      income attributable to noncontrolling interest
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            24,883
            
            
            
            24,883Distribution
      tononcontrolling
      interest
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (14,000
            )
            
            
            (14,000
            )Purchases
      of treasury stock
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (1,219,930
            )
            
            
            —
            
            
            
            (1,219,930
            )Dividends
      declared
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (565,085
            )
            
            
            —
            
            
            
            —
            
            
            
            (565,085
            )Net
      income attributable toTSR,
      Inc.
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            435,209
            
            
            
            —
            
            
            
            —
            
            
            
            435,209Balance
      at Nov. 30, 2008
            
            
            6,228,326
            
            
            $
            62,283
            
            
            $
            5,071,727
            
            
            $
            20,534,049
            
            
            $
            (13,251,231
            )
            
            $
            64,416
            
            
            $
            12,481,244Balance
      at May 31, 2009
            
            
            6,228,326
            
            
            $
            62,283
            
            
            $
            5,071,727
            
            
            $
            20,517,707
            
            
            $
            (13,251,231
            )
            
            $
            17,636
            
            
            $
            12,418,122Net
      income attributable to noncontrolling interest
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            40,820
            
            
            
            40,820Distribution
      tononcontrolling
      interest
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (6,000
            )
            
            
            (6,000
            )Net
      income attributable toTSR,
      Inc.
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            143,071
            
            
            
            —
            
            
            
            —
            
            
            
            143,071Balance
      at Nov. 30, 2009
            
            
            6,228,326
            
            
            $
            62,283
            
            
            $
            5,071,727
            
            
            $
            20,660,778
            
            
            $
            (13,251,231
            )
            
            $
            52,456
            
            
            $
            12,596,013








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








Page
5




TSR, INC.
AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


For The
Six Months Ended November 30, 2009 and 2008


(UNAUDITED)





Six
      Months EndedNovember
      30,
              2009
            
            
            November
      30,
              2008Cash
      flows from operating activities:Net
      income
            
            $
            183,891
            
            
            $
            460,092Adjustments
      to reconcile net income to net cash provided by (used in) operating
      activities:Depreciation
      and amortization
            
            
            9,087
            
            
            
            9,942Unrealized
      (gain) loss on marketable securities, net
            
            
            (2,784
            )
            
            
            7,504Deferred
      income taxes
            
            
            44,000
            
            
            
            9,000Changes
      in operating assets and liabilities:Accounts
      receivable
            
            
            (856,586
            )
            
            
            222,586Other
      receivables
            
            
            4,912
            
            
            
            14,643Prepaid
      expenses
            
            
            18,116
            
            
            
            (16,156
            )Prepaid
      and recoverable income taxes
            
            
            (32,337
            )
            
            
            (8,591
            )Accounts
      and other payables and accrued expenses and other current
      liabilities
            
            
            (98,435
            )
            
            
            (542,688
            )Advances
      from customers
            
            
            (24,000
            )
            
            
            (77,917
            )Net
      cash provided by (used in) operating activities
            
            
            (754,136
            )
            
            
            78,415Cash
      flows from investing activities:Proceeds
      from maturities of marketable securities
            
            
            2,996,508
            
            
            
            5,941,717Purchases
      of marketable securities
            
            
            (1,999,191
            )
            
            
            (3,962,494
            )Purchases
      of equipment and leasehold improvements
            
            
            (2,284
            )
            
            
            (9,635
            )Net
      cash provided by investing activities
            
            
            995,033
            
            
            
            1,969,588Cash
      flows from financing activities:Purchases
      of treasury stock
            
            
            —
            
            
            
            (1,219,930
            )Cash
      dividends paid
            
            
            —
            
            
            
            (565,085
            )Distribution
      to noncontrolling interest
            
            
            (6,000
            )
            
            
            (14,000
            )Net
      cash used in financing activities
            
            
            (6,000
            )
            
            
            (1,799,015
            )Net
      increase in cash and cash equivalents
            
            
            234,897
            
            
            
            248,988Cash
      and cash equivalents at beginning of period
            
            
            4,075,213
            
            
            
            1,588,443Cash
      and cash equivalents at end of period
            
            $
            4,310,110
            
            
            $
            1,837,431Supplemental
      disclosures of cash flow data:Income
      taxes paid
            
            $
            130
      ,000
            
            
            $
            336,000





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





Page
6




TSR, INC.
AND SUBSIDIARIES


NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


November
30, 2009


(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 and six months ended November 30, 2009 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,
2010.  The balance sheet at May 31, 2009 has been derived from the
audited financial statements at that date.  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, 2009.





The
Company has evaluated subsequent events through the time of filing these
condensed consolidated financial statements with the Securities and
Exchange Commission (“SEC”) on January 8, 2010.





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.  The Company has had no stock options or other common
stock equivalents outstanding during any of the periods presented.





3.
            Cash
      and Cash Equivalents





The
Company considers short-term highly liquid investments with maturities of three
months or less at the time of purchase to be cash equivalents. Cash and cash
equivalents were comprised of the following as of November 30, 2009 and May 31,
2009:




November
      30,
              2009
            
            
            May
      31,
              2009Cash
      in banks
            
            $
            2,213,903
            
            
            $
            2,008,349Money
      market funds
            
            
            2,096,207
            
            
            
            2,066,864$
            4,310,110
            
            
            $
            4,075,213




4.
            Revenue
      Recognition





The
Company’s contract computer programming services are generally provided under
time and materials agreements with customers.  Revenue is recognized
in accordance with Staff Accounting Bulletin (SAB) 104, “Revenue Recognition,”
when persuasive evidence of an arrangement exists, the services have been
rendered, the price is fixed or determinable, and collectability is reasonably
assured.  These conditions occur when a customer agreement is effected
and the consultant performs the authorized services.  Advances from
customers represent amounts received from customers prior to the Company’s
provision of the related services and credit balances from
overpayments.





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





Page
7


TSR, INC.
AND SUBSIDIARIES


NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued


November
30, 2009


(Unaudited)





5.
            Marketable
      Securities





In fiscal
2009, the Company adopted new accounting standards related to fair value
measurements. The Company has characterized its investments in marketable
securities, based on the priority of the inputs used to value the investments,
into a three-level fair value hierarchy. The fair value hierarchy gives the
highest priority to quoted prices in active markets for identical assets or
liabilities (Level 1), and lowest priority to unobservable
inputs   (Level 3). If the inputs used to measure the investments
fall within different levels of the hierarchy, the categorization is based on
the lowest level input that is significant to the fair value measurement of the
instrument.





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





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





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





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





The
following are the major categories of assets measured at fair value on a
recurring basis during the fiscal year ended May 31, 2010 using quoted prices in
active markets for identical assets (Level 1), significant other observable
inputs (Level 2) and significant unobservable inputs (Level 3):




November
      30, 2009
              
              Level
      1
              
              
              Level
      2
              
              
              Level
      3
              
              
              TotalUS
      Treasury securities
              
              $
              1,499,816
              
              
              $
              —
              
              
              $
              —
              
              
              $
              1,499,816Certificates
      of deposit
              
              
              —
              
              
              
              1,999,637
              
              
              
              —
              
              
              
              1,999,637Equity
      securities
              
              
              15,360
              
              
              
              —
              
              
              
              —
              
              
              
              15,360$
              1,515,176
              
              
              $
              1,999,637
              
              
              $
              —
              
              
              $
              3,514,813


Based
upon the Company’s intent and ability to hold its US Treasury securities to
maturity (which maturities range up to twenty-four months at purchase), such
securities have been classified as held-to-maturity and are carried at amortized
cost, which approximates market value. The Company’s equity securities are
classified as trading securities, which are carried at fair value, as determined
by quoted market prices, which is Level 1 input, as established by the fair
value hierarchy. The related unrealized gains and losses are included in
earnings.  The Company’s marketable securities at November 30, 2009
and May 31, 2009 are summarized as follows:





November
      30, 2009
              Current
            
            Amortized
              Cost
            
            
            Gross
              Unrealized
              Holding
              Gains
            
            
            Gross
              Unrealized
              Holding
              Losses
            
            
            Recorded
              ValueUS
      Treasury Securities
            
            $
            1,499,816
            
            
            $
            —
            
            
            $
            —
            
            
            $
            1,499,816Certificates
      of Deposit
            
            
            1,999,637
            
            
            
            —
            
            
            
            —
            
            
            
            1,999,637Equity
      Securities
            
            
            16,866
            
            
            
            —
            
            
            
            1,506
            
            
            
            15,360$
            3,516,319
            
            
            $
            —
            
            
            $
            1,506
            
            
            $
            3,514,813





Page
8




TSR, INC.
AND SUBSIDIARIES


NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued


November
30, 2009


(Unaudited)





May
      31, 2009
              Current
            
            Amortized
              Cost
            
            
            Gross
              Unrealized
              Holding
              Gains
            
            
            Gross
              Unrealized
              Holding
              Losses
            
            
            Recorded
              ValueUS
      Treasury Securities
            
            $
            —2,497,133
            
            
            $
            —
            
            
            $
            —
            
            
            $
            2,497,133Certificates
      of Deposit
            
            
            1,999,637
            
            
            
            —
            
            
            
            —
            
            
            
            1,999,637Equity
      Securities
            
            
            16,866
            
            
            
            —
            
            
            
            4,290
            
            
            
            12,576$
            4,513,636
            
            
            $
            —
            
            
            $
            4,290
            
            
            $
            4,509,346








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





6.
            Fair
      Value of Financial Instruments





Accounting
Standards Codification (“ASC”) Topic 825, “Financial Instruments”, requires
disclosure of the fair value of certain financial instruments. For cash and cash
equivalents, accounts receivable, accounts and other payables, accrued
liabilities and advances from customers, the amounts presented in the condensed
consolidated financial statements approximate fair value because of the
short-term maturities of these instruments.





7.
              Stockholders’
      Equity





During
the six months ended November 30, 2008, the Company purchased a total of 517,524
shares of its common stock for $1,219,930.  This consisted of 61,001
shares purchased in various transactions on the open market for $169,927 under a
previously announced repurchase plan of 300,000 shares and an additional 456,523
shares purchased in a private transaction for $1,050,003.  The Company
has not made any purchases under its repurchase plan since September
2008.





8.
              Other
      Matters





From time
to time, the Company is party to various lawsuits, some involving material
amounts. Management is not aware of any lawsuits that would have a material
adverse impact on the consolidated financial position of the
Company.





9.
            Recent
      Accounting Pronouncements





In
December 2007, the Financial Accounting Standards Board (“FASB”) issued an
accounting standard requiring an acquirer to measure the identifiable assets
acquired, the liabilities assumed and any noncontrolling interest in the
acquiree at their fair values on the acquisition date, with goodwill being the
excess value over the net identifiable assets acquired. This accounting standard
is effective for financial statements issued for fiscal years beginning after
December 15, 2008.  The adoption of this accounting standard was
subsequently codified into ASC Topic 805, “Business Combinations.”





Page
9




TSR, INC.
AND SUBSIDIARIES


NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued


November
30, 2009


(Unaudited)








Effective
      for financial statements issued for fiscal years beginning after December
      15, 2008, an acquirer is required to measure identifiable assets acquired,
      the liabilities assumed and any noncontrolling interest in the acquiree at
      their fair values on the acquisition date with goodwill being the excess
      value over net identifiable assets acquired. Noncontrolling interest in a
      subsidiary should be reported as equity in the unaudited condensed
      consolidated balance sheets. The amount of consolidated net income or loss
      attributable to the parent and to the noncontrolling interest should also
      be reported in the unaudited condensed consolidated statements of income.
      Changes in a parent’s ownership percentage and the valuation of retained
      noncontrolling equity investments when a subsidiary is deconsolidated
      should be disclosed in the unaudited condensed consolidated financial
      statements. The Company adopted this accounting standard in the first
      quarter of fiscal 2010.  As a result of the adoption, the
      Company has reported noncontrolling interests as a component of equity in
      the unaudited condensed balance sheets and the net income attributable to
      noncontrolling interests has been separately identified in the unaudited
      condensed consolidated statements of income. The prior periods presented
      have also been retrospectively restated to conform to the current
      classification requirements. Other than the change in presentation of
      noncontrolling interests, the adoption of this standard had no impact on
      the unaudited condensed consolidated financial
  statements.




In
      April 2009, the FASB issued an accounting standard to require that
      disclosures concerning the fair value of financial instruments be
      presented in interim as well as in annual financial statements. This
      accounting standard was subsequently codified into ASC Topic 825,
      “Financial Instruments.” In addition, the FASB issued an accounting
      standard to provide additional guidance for determining the fair value of
      a financial asset or financial liability when the volume and level of
      activity for such asset or liability have decreased significantly and to
      also provide guidance for determining whether a transaction is an orderly
      one. This accounting standard was subsequently codified into ASC Topic
      820, “Fair Value Measurements and Disclosures.” The FASB also issued an
      accounting standard which revised and expanded the guidance concerning the
      recognition and measurement of other-than-temporary impairments of debt
      securities classified as available-for-sale or held-to-maturity. In
      addition, it required enhanced disclosures concerning such impairment for
      both debt and equity securities. This accounting standard was subsequently
      codified into ASC Topic 320, “Investments – Debt and Equity Securities.”
      The requirements of these three accounting standards are effective for
      interim reporting periods ending after June 15, 2009. Early adoption is
      permitted for interim periods ending after March 15, 2009, but only if the
      election is made to adopt all these accounting standards. Disclosures for
      earlier periods presented for comparative purposes at initial adoption are
      not required. In periods after initial adoption, comparative disclosures
      are required only for periods ending after initial adoption. The Company
      has adopted the accounting standards for the first quarter of fiscal
      2010.




In
      May 2009, the FASB issued an accounting standard which provides guidance
      to establish general standards of accounting for and disclosures of events
      that occur after the balance sheet date but before financial statements
      are issued or are available to be issued. It requires entities to disclose
      the date through which subsequent events were evaluated as well as the
      rationale for why the date was selected. This accounting standard is
      effective for interim and annual periods ending after June 15, 2009 and,
      accordingly, was adopted by the Company during the first quarter of fiscal
      2010. It requires public entities evaluate subsequent events through the
      date that the financial statements are issued. This accounting standard
      was subsequently codified into ASC Topic 855, “Subsequent Events.” The
      Company has evaluated subsequent events through the time of filing these
      condensed consolidated financial statements with the Securities and
      Exchange Commission (“SEC”) on January 8,
2010.




In
      June 2009, the FASB issued an accounting standard which established
      the Codification to become the single source of authoritative accounting
      principles generally accepted in the United States of America (“GAAP”)
      recognized by the FASB to be applied by nongovernmental entities, with the
      exception of guidance issued by the SEC and its staff. All guidance
      contained in the Codification carries an equal level of authority. The
      Codification is not intended to change GAAP, but rather is expected to
      simplify accounting research by reorganizing current GAAP into
      approximately 90 accounting topics and providing all the authoritative
      literature related to a topic in one place. The Company adopted this
      accounting standard in preparing the condensed consolidated financial
      statements for the quarter ended November 30, 2009 and all subsequent
      public filings will reference the Codification as the sole source of
      authoritative literature.  The adoption of this accounting
      standard, which was subsequently codified into ASC Topic 105, “Generally
      Accepted Accounting Principles,” had no impact on retained earnings and
      will have no impact on the Company’s statements of
  income.







Page
10




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:  the impact
of current adverse conditions in the credit markets and current adverse economic
conditions on the Company’s business; risks relating to the competitive nature
of the markets for contract computer programming services; the extent to which
market conditions for the Company’s contract computer consulting services will
continue to adversely affect the Company’s business; the concentration of the
Company’s business with certain customers; uncertainty as to the Company’s
ability to maintain its relations with existing customers and expand its
contract computer consulting services business; the impact of changes in the
industry, such as the use of vendor management companies in connection with the
consultant procurement process, the increase in customers moving IT operations
offshore and other risks and uncertainties set forth in the Company’s filings
with the Securities and Exchange Commission.  The Company is under no
obligation to publicly update or revise forward looking statements.





Results
of Operations





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





Three
months ended November 30, 2009 compared with three months ended November 30,
2008





(Dollar
      amounts in thousands)

              Three
      Months EndedNovember
      30,
              2009
            
            
            November
      30,
              2008Amount
            
            
            %
      of
              Revenue
            
            
            Amount
            
            
            %
      of
              RevenueRevenue,
      net
            
            $
            9,340
            
            
            
            100.0
            %
            
            $
            11,536
            
            
            
            100.0
            %Cost
      of sales
            
            
            7,654
            
            
            
            81.9
            %
            
            
            9,467
            
            
            
            82.1
            %Gross
      profit
            
            
            1,686
            
            
            
            18.1
            %
            
            
            2,069
            
            
            
            17.9
            %Selling,
      general and administrative expenses
            
            
            1,516
            
            
            
            16.2
            %
            
            
            1,696
            
            
            
            14.7
            %Income
      from operations
            
            
            170
            
            
            
            1.9
            %
            
            
            373
            
            
            
            3.2
            %Other
      income, net
            
            
            13
            
            
            
            0.1
            %
            
            
            28
            
            
            
            0.2
            %Income
      before income taxes
            
            
            183
            
            
            
            2.0
            %
            
            
            401
            
            
            
            3.4
            %Provision
      for income taxes
            
            
            82
            
            
            
            0.9
            %
            
            
            165
            
            
            
            1.4
            %Net
      income
            
            $
            101
            
            
            
            1.1
            %
            
            $
            236
            
            
            
            2.0
            %








Page
11





TSR, INC.
AND SUBSIDIARIES





Revenue





Revenue
consists primarily of revenue from computer programming consulting
services.  Revenue for the quarter ended November 30, 2009 decreased
$2,196,000 or 19.0% from the prior year quarter.  The average number
of consultants on billing with customers decreased from approximately 281 for
the quarter ended November 30, 2008 to 222 for the quarter ended November 30,
2009.  The continuing impact of the current economic environment has
significantly decreased the number of consultants on billing with customers and
also decreased the opportunities to place new consultants on billing with
customers. The revenue decrease is also the result of the continued reduction in
consultants placed with AT&T and lower billing rates caused by discounts and
other rate reductions instituted by customers.





As a
result of the merger of AT&T with SBC Communications, Inc., the Company
experienced a decrease in new placements with AT&T beginning in the second
quarter of fiscal 2007.  This has reduced the number of consultants on
billing with AT&T from 53 at November 30, 2007 to 25 at November 30, 2008
and to 4 at November 30, 2009.  The Company expects that these changes
will continue to impact the Company’s business relationship with AT&T,
resulting in few, if any, opportunities to place new consultants at
AT&T.





The
Company’s revenue from programmers on billing continue to be affected by
discounts, such as prompt payment and volume discounts, required by major
customers as a condition to remaining on their approved vendor lists and the
reduction in the number of vendors on the approved vendor lists to increase
pricing competition among the remaining vendors.  In addition, most of
the Company’s major customers have retained third parties to provide vendor
management services and centralize the consultant hiring
process.  Under this system, the third party retains the Company to
provide contract computer programming services, the Company bills the third
party and the third party bills the ultimate customer.  This process
has weakened the relationships the Company has built with its client contacts,
the project managers, who the Company would normally work directly with to place
consultants.  Instead, the Company is required to interface with the
vendor management provider, making it more difficult to maintain its
relationships with its customers and preserve and expand its
business.  These changes have also reduced the Company’s profit
margins because the vendor management company is retained for the purpose of
keeping costs down for the end client and receives a processing fee which is
deducted from the payment to the Company.  Revenue has also been
impacted by the increased use of offshore development companies, particularly in
India, over the past few years to provide technology related work and
projects.  The Company is unable to predict the long-term effects of
these changes.





As a
result of the current economic downturn and, specifically, the impact of the
adverse conditions in the credit markets on the financial services industry, the
Company  has experienced a decrease in the number of consultants on
billing with customers as a result of decreased IT spending.  These
economic conditions have also reduced the opportunities to place new consultants
on billing with customers. The Company expects that these conditions will
continue to affect the number of consultants on billing with customers and the
Company’s revenue.





The
Company provided services to Lehman Brothers Holdings, Inc. (“LBHI”) through its
contract with Beeline.com, Inc. (“Beeline”), a vendor management company. LBHI
filed a petition under Chapter 11 of the U.S. Bankruptcy Code on September 15,
2008. The Company has received payment in full for amounts due for services
rendered through the date of the bankruptcy filing. Following the bankruptcy
filing, the consultants on billing with LBHI decreased from 13 as of August 31,
2008 to 2 as of November 30, 2009.  LBHI and its subsidiaries
constituted approximately 6% of the Company’s revenue in fiscal 2008 and 4% in
fiscal 2009.





Cost
of Sales





Cost of
sales for the quarter ended November 30, 2009, decreased $1,813,000 or 19.2% to
$7,654,000 from $9,467,000 in the prior year period.  The decrease in
cost of sales resulted primarily from the decrease in the number of consultants
on billing with clients.  Cost of sales as a percentage of revenue
decreased from 82.1% in the quarter ended November 30, 2008 to 81.9% in the
quarter ended November 30, 2009.  The decrease in cost of sales as a
percentage of revenue was primarily attributable to the significant reduction of
consultants on billing with AT&T, which has historically been the Company’s
lowest margin (highest cost of sales as a percentage of revenue)
business.











Page
12





TSR, INC.
AND SUBSIDIARIES








Selling,
General and Administrative Expenses





Selling,
general and administrative expenses consist primarily of expenses relating to
account executives, technical recruiters, facilities costs, management and
corporate overhead.   These expenses decreased $180,000 or 10.6%
from $1,696,000 in the quarter ended November 30, 2008 to $1,516,000 in the
quarter ended November 30, 2009.  This decrease was primarily
attributable to a reduction in the number of sales and recruiting personnel and
lower commissions paid to the remaining sales and recruiting personnel due to
lower revenue. Technical recruiters and account executives have been terminated
in order to lessen the impact of the Company’s reduced level of business
activity. However, while selling, general and administrative expenses decreased,
these expenses as a percentage of revenue increased from 14.7% in the quarter
ended November 30, 2008 to 16.2% in the quarter ended November 30, 2009 as a
result of lower revenue.





Income
from Operations





Income
from operations decreased $203,000 or 54.5% from $373,000 in the quarter ended
November 30, 2008 to $170,000 in the quarter ended November 30, 2009. The
decrease was primarily attributable to the reduced revenue from the decrease in
the number of consultants on billing with customers.





In
November 2009, the Company settled a preference claim asserted by the trustee in
bankruptcy of a vendor management company relating to payments received by the
Company during the 90 days prior to the bankruptcy filing for
$100,000.  The Company had provided for this contingency in prior
periods as part of its allowance for doubtful accounts and, as a result, the
charge was applied to this reserve. Accordingly, there was no impact on income
from operations.





Other
Income





Other
income for the quarter ended November 30, 2009 resulted primarily from interest
and dividend income of $14,000, which decreased by $21,000 from the level
realized in the quarter ended November 30, 2008 due to lower interest rates
earned on the Company’s US Treasury securities, certificates of deposit and
money market accounts as well as lower average investable assets.





Income
Taxes





The
effective income tax rate increased from 41.2% in the quarter ended November 30,
2008 to 44.8% in the quarter ended November 30, 2009.  Additional
income taxes were provided in the current period as the result of certain state
income taxes.





Net
Income





Net
income decreased $135,000 or 57.1% from the quarter ended November 30, 2008 to
the quarter ended November 30, 2009.  Net income decreased primarily
due to lower revenue from a decreased number of consultants on billing with
clients and lower interest income earned on the Company’s US Treasury securities
and money market accounts.














Page
13




TSR, INC.
AND SUBSIDIARIES





Six
months ended November 30, 2009 compared with six months ended November 30,
2008





(Dollar
      amounts in thousands)

                Six
      Months EndedNovember
      30,
                2009
              
              
              November
      30,
                2008Amount
              
              
              %
      of
                Revenue
              
              
              Amount
              
              
              %
      of
                RevenueRevenue,
      net
              
              $
              18,433
              
              
              
              100.0
              %
              
              $
              23,686
              
              
              
              100.0
              %Cost
      of sales
              
              
              15,101
              
              
              
              81.9
              %
              
              
              19,495
              
              
              
              82.3
              %Gross
      profit
              
              
              3,332
              
              
              
              18.1
              %
              
              
              4,191
              
              
              
              17.7
              %Selling,
      general and administrative expenses
              
              
              3,042
              
              
              
              16.5
              %
              
              
              3,496
              
              
              
              14.8
              %Income
      from operations
              
              
              290
              
              
              
              1.6
              %
              
              
              695
              
              
              
              2.9
              %Other
      income, net
              
              
              35
              
              
              
              0.2
              %
              
              
              95
              
              
              
              0.4
              %Income
      before income taxes
              
              
              325
              
              
              
              1.8
              %
              
              
              790
              
              
              
              3.3
              %Provision
      for income taxes
              
              
              141
              
              
              
              0.8
              %
              
              
              330
              
              
              
              1.4
              %Net
      income
              
              $
              184
              
              
              
              1.0
              %
              
              $
              460
              
              
              
              1.9
              %




Revenue





Revenue
consists primarily of revenue from computer programming consulting
services.  Revenue for the six months ended November 30, 2009
decreased $5,253,000 or 22.2% from the prior year period.  The average
number of consultants on billing with customers decreased from approximately 290
for the six months ended November 30, 2008 to 219 for the six months ended
November 30, 2009.  The continuing impact of the current economic
environment has significantly decreased the number of consultants on billing
with customers and also decreased the opportunities to place new consultants on
billing with customers. The revenue decrease is also the result of the continued
reduction in consultants placed with AT&T and lower billing rates caused by
discounts and other rate reductions instituted by customers.





Revenues
for the six months ended November 30, 2009 were affected by the same factors as
previously described in the discussion of the three months ended November 30,
2009.  See page 12.





Cost
of Sales





Cost of
sales for the six months ended November 30, 2009, decreased $4,394,000 or 22.5%
to $15,101,000 from $19,495,000 in the prior year period.  The
decrease in cost of sales resulted primarily from the decrease in the number of
consultants on billing with clients.  Cost of sales as a percentage of
revenue decreased from 82.3% in the six months ended November 30, 2008 to 81.9%
in the six months ended November 30, 2009.  The decrease in cost of
sales as a percentage of revenue was primarily attributable to the significant
reduction of consultants on billing with AT&T, which has historically been
the Company’s lowest margin (highest cost of sales as a percentage of revenue)
business.











Page
14




TSR, INC.
AND SUBSIDIARIES











Selling,
General and Administrative Expenses





Selling,
general and administrative expenses consist primarily of expenses relating to
account executives, technical recruiters, facilities costs, management and
corporate overhead.   These expenses decreased $454,000 or 13.0%
from $3,496,000 in the six months ended November 30, 2008 to $3,042,000 in the
six months ended November 30, 2009.  This decrease was primarily
attributable to a reduction in the number of sales and recruiting personnel and
lower commissions paid to the remaining sales and recruiting personnel due to
lower revenue. Technical recruiters and account executives have been terminated
in order to lessen the impact of the Company’s reduced level of business
activity. However, while selling, general and administrative expenses decreased,
these expenses as a percentage of revenue increased from 14.8% in the six months
ended November 30, 2008 to 16.5% in the six months ended November 30, 2009 as a
result of lower revenue.





Income
from Operations





Income
from operations decreased $405,000 or 58.3% from $695,000 in the six months
ended November 30, 2008 to $290,000 in the six months ended November 30, 2009.
The decrease was primarily attributable to the reduced revenue from the decrease
in the number of consultants on billing with customers.





In
November 2009, the Company settled a preference claim asserted by the trustee in
bankruptcy of a vendor management company relating to payments received by the
Company during the 90 days prior to the bankruptcy filing for
$100,000.  The Company had provided for this contingency in prior
periods as part of its allowance for doubtful accounts and, as a result, the
charge was applied to this reserve. Accordingly, there was no impact on income
from operations.





Other
Income





Other
income for the six months ended November 30, 2009 resulted primarily from
interest and dividend income of $32,000, which decreased by $70,000 from the
level realized in the six months ended November 30, 2008 due to lower interest
rates earned on the Company’s US Treasury securities, certificates of deposit
and money market accounts as well as lower average investable
assets.





Income
Taxes





The
effective income tax rate increased from 41.8% in the six months ended November
30, 2008 to 43.4% in the six months ended November 30,
2009.  Additional income taxes were provided in the current period as
the result of certain state income taxes.





Net
Income





Net
income decreased $276,000 or 60.0% from the six months ended November 30, 2008
to the six months ended November 30, 2009.  Net income decreased
primarily due to lower revenue from a decreased number of consultants on billing
with clients and lower interest income earned on the Company’s US Treasury
securities and money market accounts.




















Page
15




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 at least the next 12
months.





At
November 30, 2009, the Company had working capital of $12,475,000 including cash
and cash equivalents of $4,310,000 as compared to working capital of $12,288,000
including cash and cash equivalents of $4,075,000 at May 31,
2009.  The Company’s working capital also included $3,515,000 and
$4,509,000 of marketable securities with maturities of less than one year at
November 30, 2009 and May 31, 2009, respectively.





For the
six months ended November 30, 2009, net cash used in operating activities was
$754,000 compared to cash provided by operating activities of $78,000 for the
six months ended November 30, 2008, or an increase of $832,000.  The
cash used in operating activities primarily resulted from an increase in
accounts receivable of $857,000 offset by net income and an increase in accounts
and other payables and accrued expenses and other current liabilities of
$98,000. The increase in accounts receivable resulted primarily from additional
accounts extending their payment terms from sixty to ninety days. The cash
provided by operating activities in the six months ended November 30, 2008,
resulted primarily from net income.





Net cash
provided by investing activities of $995,000 for the six months ended November
30, 2009 primarily resulted from the maturity of US Treasury
securities.





Net cash
used in financing activities resulted from distributions to the noncontrolling
interest of $6,000 in the six months ended November 30, 2009.  In the
six months ended November 30, 2008, net cash used in financing activities
resulted from purchases of treasury stock of $1,220,000 and cash dividends paid
of $565,000.  In December 2009, the Board of Directors of the Company
reaffirmed a plan previously approved in December 2007 authorizing the
repurchase of shares of Common Stock and approximately 239,000 shares remain
available for purchase under this plan. The Company has not made any purchases
under this plan since September 2008.  The Board of Directors
determined to suspend the payment of further dividends effective after the
dividend paid on February 9, 2009 for the second quarter of fiscal
2009.  The Board of Directors may reevaluate the Company’s dividend
policy once the economic conditions stabilize.





The
Company’s capital resource commitments at November 30, 2009 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.





The
Company’s cash and marketable securities were sufficient to enable it to meet
its cash requirements during the six months ended November 30,
2009.  The Company has available a revolving line of credit of
$5,000,000 with a major money center bank through February 26,
2010.  As of November 30, 2009, no amounts were outstanding under this
line of credit.





Tabular
Disclosure of Contractual Obligations








Payments
      Due By PeriodContractual
      Obligations
            
            Total
            
            
            Less
      than
              1
      Year
            
            
            1-3
      Years
            
            
            3-5
      Years
            
            
            More
      than
              5
      YearsOperating
      Leases
            
            $
            1,032,000
            
            
            $
            368,000
            
            
            $
            546,000
            
            
            $
            118,000
            
            
            $
            -Employment
      Agreements
            
            
            763,000
            
            
            
            513,000
            
            
            
            250,000
            
            
            
            -
            
            
            
            -Totals
            
            $
            1,795,000
            
            
            $
            881,000
            
            
            $
            796,000
            
            
            $
            118,000
            
            
            $
            -











Page
16




TSR, INC.
AND SUBSIDIARIES





Recent
Accounting Pronouncements





In
December 2007, the FASB issued an accounting standard requiring an acquirer to
measure the identifiable assets acquired, the liabilities assumed and any
noncontrolling interest in the acquiree at their fair values on the acquisition
date, with goodwill being the excess value over the net identifiable assets
acquired. This accounting standard is effective for financial statements issued
for fiscal years beginning after December 15, 2008.  The adoption of
this accounting standard was subsequently codified into ASC Topic 805, “Business
Combinations.”




Effective
for financial statements issued for fiscal years beginning after December 15,
2008, an acquirer is required to measure identifiable assets acquired, the
liabilities assumed and any noncontrolling interest in the acquiree at their
fair values on the acquisition date with goodwill being the excess value over
net identifiable assets acquired. Noncontrolling interest in a subsidiary should
be reported as equity in the unaudited condensed consolidated balance sheets.
The amount of consolidated net income or loss attributable to the parent and to
the noncontrolling interest should also be reported in the unaudited condensed
consolidated statements of income. Changes in a parent’s ownership percentage
and the valuation of retained noncontrolling equity investments when a
subsidiary is deconsolidated should be disclosed in the unaudited condensed
consolidated financial statements. The Company adopted this accounting standard
in the first quarter of fiscal 2010.  As a result of the adoption, the
Company has reported noncontrolling interests as a component of equity in the
unaudited condensed balance sheets and the net income attributable to
noncontrolling interests has been separately identified in the unaudited
condensed consolidated statements of income. The prior periods presented have
also been retrospectively restated to conform to the current classification
requirements. Other than the change in presentation of noncontrolling interests,
the adoption of this standard had no impact on the unaudited condensed
consolidated financial statements.




In April
2009, the FASB issued an accounting standard to require that disclosures
concerning the fair value of financial instruments be presented in interim as
well as in annual financial statements. This accounting standard was
subsequently codified into ASC Topic 825, “Financial Instruments.” In addition,
the FASB issued an accounting standard to provide additional guidance for
determining the fair value of a financial asset or financial liability when the
volume and level of activity for such asset or liability have decreased
significantly and to also provide guidance for determining whether a transaction
is an orderly one. This accounting standard was subsequently codified into ASC
Topic 820, “Fair Value Measurements and Disclosures.” The FASB also issued an
accounting standard which revised and expanded the guidance concerning the
recognition and measurement of other-than-temporary impairments of debt
securities classified as available-for-sale or held-to-maturity. In addition, it
required enhanced disclosures concerning such impairment for both debt and
equity securities. This accounting standard was subsequently codified into ASC
Topic 320, “Investments – Debt and Equity Securities.” The requirements of these
three accounting standards are effective for interim reporting periods ending
after June 15, 2009. Early adoption is permitted for interim periods ending
after March 15, 2009, but only if the election is made to adopt all these
accounting standards. Disclosures for earlier periods presented for comparative
purposes at initial adoption are not required. In periods after initial
adoption, comparative disclosures are required only for periods ending after
initial adoption. The Company has adopted the accounting standards for the first
quarter of fiscal 2010.




In May
2009, the FASB issued an accounting standard which provides guidance to
establish general standards of accounting for and disclosures of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. It requires entities to disclose the date through
which subsequent events were evaluated as well as the rationale for why the date
was selected. This accounting standard is effective for interim and annual
periods ending after June 15, 2009 and, accordingly, was adopted by the Company
during the first quarter of fiscal 2010. It requires public entities evaluate
subsequent events through the date that the financial statements are issued.
This accounting standard was subsequently codified into ASC Topic 855,
“Subsequent Events.” The Company has evaluated subsequent events through the
time of filing these condensed consolidated financial statements with the
Securities and Exchange Commission (“SEC”) on January 8, 2010.




In
June 2009, the FASB issued an accounting standard which established the
Codification to become the single source of authoritative accounting principles
generally accepted in the United States of America (“GAAP”) recognized by the
FASB to be applied by nongovernmental entities, with the exception of guidance
issued by the SEC and its staff. All guidance contained in the Codification
carries an equal level of authority. The Codification is not intended to change
GAAP, but rather is expected to simplify accounting research by reorganizing
current GAAP into approximately 90 accounting topics and providing all the
authoritative literature related to a topic in one place. The Company adopted
this accounting standard in preparing the condensed consolidated financial
statements for the quarter ended November 30, 2009 and all subsequent public
filings will reference the Codification as the sole source of authoritative
literature.  The adoption of this accounting standard, which was
subsequently codified into ASC Topic 105, “Generally Accepted Accounting
Principles,” had no impact on retained earnings and will have no impact on the
Company’s statements of income.




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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, 2009
Annual Report on Form10-K, as filed with the SEC.  The Company
believes that those accounting policies require the application of management’s
most difficult, subjective or complex judgments.  There have been no
changes in the Company’s significant accounting policies as of November 30,
2009.





Item
4T.  Controls and Procedures





Disclosure Controls and
Procedures.  The Company conducted an evaluation, under the
supervision and with the participation of the principal executive officer and
principal accounting officer, of the Company’s disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (the “Exchange Act”)).  Based on this evaluation,
the principal executive officer and principal accounting officer concluded that,
as of the end of the period covered by this report, the Company’s disclosure
controls and procedures are effective.





Internal Control Over Financial
Reporting.  There was no change in the Company’s internal
control over financial reporting (as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) during the Company’s most recently reported
completed fiscal quarter that has materially affected, or is reasonably likely
to materially affect, the Company’s internal control over financial
reporting.





Part
      II.
            Other
      Information





Item
6.   Exhibits




(a).
            Exhibit
      31.1 – Certification by J.F. Hughes pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant toSection
      302 of the Sarbanes-Oxley Act of 2002
              
              Exhibit
      31.2 - Certification by John G. Sharkey pursuant to 18 U.S.C. Section
      1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002
                
                Exhibit
      32.1 – Certification by J.F. Hughes pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002
                
                Exhibit
      32.2 – Certification by John G. Sharkey pursuant to 18 U.S.C. Section
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002








SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereto
duly authorized.




TSR
      Inc.
                (Registrant)Date:  January
      8, 2010
              /s/
      J.F. Hughes
                J.F.
      Hughes, Chairman and PresidentDate:  January
      8, 2010
              /s/
      John G. Sharkey
                John
      G. Sharkey, Vice President Finance and Chief Financial
    Officer


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