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

                                  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 February 28, 2002


                [ ]  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
            ---------------------------------------------------------
            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



                               SHARES OUTSTANDING
                               ------------------
                        4,418,012 SHARES OF COMMON STOCK,
                 PAR VALUE $.01 PER SHARE, AS OF MARCH 31, 2002
                 ----------------------------------------------


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


                                     page 1


<PAGE>


                           TSR, INC. AND SUBSIDIARIES
                                      INDEX




                                                                           Page
                                                                          Number
                                                                          ------
Part I. Financial Information:

  Item 1. Financial Statements:

    Condensed Consolidated Balance Sheets -
        February 28, 2002 and May 31, 2001.................................    3
    Condensed Consolidated Statements of Earnings -
        For the three and nine months ended February 28, 2002 and 2001.....    4

    Condensed Consolidated Statements of Cash Flows -
        For the nine months ended February 28, 2002 and 2001...............    5

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

  Item 2. Management's Discussion and Analysis of Financial Condition and
              Results of Operations.........................................   9

  Item 3. Quantitative and Qualitative Disclosure About Market Risk.........  15

Part II. Other Information..................................................  15

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



                                     Page 2

<PAGE>



PART I. FINANCIAL INFORMATION
        ITEM 1. FINANCIAL STATEMENTS

                           TSR, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                   February 28,     May 31,
ASSETS                                                                 2002          2001
                                                                   ------------   -----------
                                                                    (unaudited)
<S>                                                                <C>           <C>
Current Assets:
 Cash and cash equivalents (Note 3) .............................   $ 6,567,421   $ 6,208,361
 Marketable securities (Note 5) .................................     6,957,291     4,432,978
 Accounts receivable (net of allowance for
   doubtful accounts of $430,000 and $273,000) ..................    10,096,581    11,935,795
 Other receivables ..............................................        50,957        59,016
 Prepaid expenses ...............................................        64,798        33,727
 Prepaid and recoverable income taxes ...........................        30,723       144,363
 Deferred income taxes ..........................................       173,000        93,000
                                                                    -----------   -----------
   Total current assets .........................................    23,940,771    22,907,240

Equipment and leasehold improvements, at cost (net of accumulated
 depreciation and amortization of $683,000 and $616,000) ........        91,364       141,513
Other assets ....................................................        46,145        46,145
Deferred income taxes ...........................................        81,000       189,000
Acquired client relationships, net of accumulated amortization
 of $28,602 (Note 7) ............................................       143,006          --
                                                                    -----------   -----------
                                                                    $24,302,286   $23,283,898
                                                                    ===========   ===========
LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
 Accounts payable ...............................................   $   104,326   $   123,852
 Accrued expenses and other current liabilities .................     2,009,052     3,070,908
 Advances from customers. (Note 4) ..............................     1,778,621     1,688,150
 Income taxes payable ...........................................       204,254       213,955
                                                                    -----------   -----------
   Total current liabilities ....................................     4,096,253     5,096,865
                                                                    -----------   -----------
Shareholders' Equity:
 Preferred stock, $1 par value, authorized
   1,000,000 shares; none issued ................................          --            --
 Common stock, $.01 par value, authorized
   25,000,000 shares; issued 6,078,326 shares ...................        60,783        60,783
 Additional paid-in capital .....................................     4,134,053     4,134,053
 Retained earnings ..............................................    28,042,498    26,023,498
                                                                    -----------   -----------
                                                                     32,237,334    30,218,334
 Less: Treasury Stock, 1,660,314 shares at cost (Note 6) ........    12,031,301    12,031,301
                                                                    -----------   -----------
                                                                     20,206,033    18,187,033
                                                                    -----------   -----------
                                                                    $24,302,286   $23,283,898
                                                                    ===========   ===========

</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 EARNINGS
         FOR THE THREE AND NINE MONTHS ENDED FEBRUARY 28, 2002 AND 2001
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                       Three Months Ended           Nine Months Ended
                                                          February 28,                 February 28,
                                                      2002           2001            2002           2001
                                                      ----           ----            ----           ----
<S>                                               <C>             <C>             <C>             <C>
Revenues ......................................   $ 12,863,937    $ 19,220,277    $ 45,616,630    $ 60,007,969
Cost of sales .................................     10,184,813      15,061,511      35,716,569      46,716,401
Selling, general and administrative expenses ..      2,002,451       2,839,951       6,594,204       8,442,749
                                                  ------------    ------------    ------------    ------------
                                                    12,187,264      17,901,462      42,310,773      55,159,150
                                                  ------------    ------------    ------------    ------------
Income from operations ........................        676,673       1,318,815       3,305,857       4,848,819

Other income:
 Interest and dividend income .................         63,490         144,644         261,864         351,758
 Unrealized gain (loss) from marketable
  securities, net .............................         (4,482)        (25,369)         (3,721)         17,688
 Minority interest in subsidiary operating loss            111            --             1,000            --
                                                  ------------    ------------    ------------    ------------
Income before income taxes ....................        735,792       1,438,090       3,565,000       5,218,265
Provision for income taxes ....................        341,000         638,000       1,546,000       2,284,000
                                                  ------------    ------------    ------------    ------------
  Net income ..................................   $    394,792    $    800,090    $  2,019,000    $  2,934,265
                                                  ============    ============    ============    ============
Basic and diluted net income per common share .   $       0.09    $       0.18    $       0.46    $       0.65
                                                  ============    ============    ============    ============
Weighted average number of basic common
 shares outstanding ...........................      4,418,012       4,423,945       4,418,012       4,519,990
                                                  ============    ============    ============    ============
Weighted average number of diluted common
 shares outstanding ...........................      4,430,442       4,423,945       4,418,012       4,519,990
                                                  ============    ============    ============    ============
</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 NINE MONTHS ENDED FEBRUARY 28, 2002 AND 2001
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                  Nine Months Ended
                                                                    February 28,

                                                                   2002          2001
                                                               -----------    -----------
<S>                                                            <C>            <C>
Cash flows from operating activities:
 Net income ................................................   $ 2,019,000    $ 2,934,265
 Adjustments to reconcile net income
  to net cash provided by operating activities:
 Depreciation and amortization .............................        94,986         84,469
 Unrealized loss (gain) from marketable securities, net ....         3,721        (17,688)
 Deferred income taxes .....................................        28,000        (34,000)
 Provision for doubtful accounts ...........................       200,000        100,000
 Minority interest in subsidiary operating loss ............        (1,000)          --

Changes in assets and liabilities:
 Accounts receivable .......................................     1,935,909     (1,299,992)
 Other receivables .........................................        14,884         63,752
 Prepaid expenses ..........................................       (31,071)        (2,959)
 Prepaid and recoverable income taxes ......................       113,640         18,528
 Other assets ..............................................          --           (5,843)
 Accounts payable and accrued expenses .....................    (1,298,181)      (743,681)
 Income taxes payable ......................................        (9,701)        (5,104)
 Advances from customers ...................................        90,471        708,596
                                                               -----------    -----------
 Net cash provided by operating activities .................     3,160,658      1,800,343
                                                               -----------    -----------
Cash flows from investing activities:
 Proceeds from maturities and sales of marketable securities     7,348,361      4,109,937
 Purchases of marketable securities ........................    (9,876,395)    (4,863,351)
 Purchases of fixed assets .................................          --          (59,488)
 Purchases of net assets, net of cash acquired .............      (274,564)          --
                                                               -----------    -----------
 Net cash used in investing activities .....................    (2,802,598)      (812,902)
                                                               -----------    -----------
Cash flows from financing activities:
 Purchases of treasury stock ...............................          --       (1,419,141)
 Proceeds from sale of minority interest ...................         1,000           --
                                                               -----------    -----------
 Net cash provided by (used in) financing activities .......         1,000     (1,419,141)
                                                               -----------    -----------
Net increase (decrease) in cash and cash equivalents .......       359,060       (431,700)
Cash and cash equivalents at beginning of period ...........     6,208,361      4,110,283
                                                               -----------    -----------
Cash and cash equivalents at end of period .................   $ 6,567,421    $ 3,678,583
                                                               ===========    ===========
Supplemental Disclosures:
 Income tax payments .......................................   $ 1,414,000    $ 2,305,000
                                                               ===========    ===========

</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
                                FEBRUARY 28, 2002
                                   (UNAUDITED)


1.   Basis of Presentation

     The accompanying condensed consolidated interim financial statements
     include the accounts of TSR, Inc. and its majority-owned 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 and nine months ended February
     28, 2002, 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, 2002. 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, 2001.

2.   Earnings Per Share

     Basic net income per common share is computed by dividing income available
     to common shareholders (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 190,000 shares of common stock
     have been omitted from the calculations of diluted net income per common
     share for the nine month period ended February 28, 2002 and for the three
     month and nine month periods ended February 28, 2001 respectively, as their
     effect would have been antidilutive.

3    Cash Flows

     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 February
     28, 2002:

                Cash in banks ......................  $1,241,380
                Money Market Funds .................   4,828,151
                United States Treasury Bills .......     497,890
                                                      ----------
                                                      $6,567,421
                                                      ==========

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. Such amounts are expected to be settled
     within the next year.

     Effective March 1, 2001, the Company adopted Emerging Issues Task Force
     Issue No. 99-19, "Reporting Revenue Gross as a Principal Versus Net as an
     Agent." Accordingly, revenues and cost of sales for the three and nine
     months ended February 28, 2001, have been reduced from amounts previously
     reported by $172,488 and $520,299, respectively, to conform to the fiscal
     2002 presentation.



                                     Page 6


<PAGE>



                           TSR, INC. AND SUBSIDIARIES
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                                FEBRUARY 28, 2002
                                   (UNAUDITED)


J.   Marketable Securities

     Marketable securities consist of United States Treasury Bills and equity
     securities. Treasury bills with maturities at acquisition in excess of 90
     days are classified as held-to-maturity investments 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 amortized cost, gross unrealized holding
     gains, gross unrealized holding losses and fair value for marketable
     securities by major security type at February 28, 2002 are as follows:

<TABLE>
<CAPTION>

                                                                    Gross        Gross
                                                                  Unrealized   Unrealized
                                                     Amortized      Holding      Holding        Fair
                                                       Cost         Gains        Losses         Value
                                                    -----------   -----------  -----------   -----------
<S>                                                 <C>             <C>         <C>          <C>
    United States Treasury Bills...............     $ 6,928,255          --          --       6,928,255
    Equity Securities........................            28,287       6,757      (6,008)         29,036
                                                    -----------     -------     -------      ----------
                                                    $ 6,956,542     $ 6,757     $(6,008)     $6,957,291
                                                    ===========     =======     =======      ==========
</TABLE>

J.   Treasury Stock

     During the nine months ended February 28, 2001, the Company repurchased
     226,800 shares of its common stock at a cost of $1,242,668. There were no
     repurchases transacted in the nine months ended February 28, 2002. To date,
     the Company has repurchased a total of 1,660,314 shares at a cost of
     $12,031,301.

J.   Acquisition

     In August 2001, the Company capitalized a newly formed subsidiary with
     $4,000 and simultaneously sold a 20% interest to a third party for $1,000.
     On August 14, 2001, this subsidiary acquired substantially all of the
     assets and assumed certain liabilities of a computer-consulting firm for
     cash of $286,500 (including cash acquired of $11,936). In accordance with
     Statement of Financial Accounting Standards No. 141, Accounting for
     Business Combinations ("SFAS No. 141"), this transaction was accounted for
     as a purchase business combination. Accordingly, the purchase price has
     been allocated to the assets acquired and liabilities assumed based on
     their estimated fair values, summarized as follows:

         Cash ........................................    $  11,936
         Other current assets.........................      303,520
         Equipment ...................................       16,235
         Acquired client relationships................      171,608
         Current liabilities..........................     (216,799)
                                                          ---------
                                                          $ 286,500
                                                          =========

     In connection with the acquisition, the Company acquired certain
     contractual client relationships. The related intangible asset is being
     amortized over a three-year period, reflecting the estimated average life
     of the underlying client relationships.

     The results of operations of the acquired business have been included in
     the Company's consolidated financial statements from the date of
     acquisition. Had the acquisition been completed as of June 1, 2001, pro
     forma consolidated revenues, net income and net income per common share
     would have been $46,100,000, $2,030,000, and $0.46, respectively, for the
     nine months ended February 28, 2002.


                                     Page 7


<PAGE>



                           TSR, INC. AND SUBSIDIARIES
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                                FEBRUARY 28, 2002
                                   (UNAUDITED)


J.   Recent Accounting Pronouncements

     In June 2001, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standards No. 142 "Goodwill and Other Intangible
     Assets" (SFAS No. 142)", which is effective for fiscal years beginning
     after June 15, 2001. SFAS No. 142 establishes accounting and reporting
     standards for goodwill and intangible assets. Under SFAS No. 142,
     amortization of goodwill will be terminated. However, goodwill will be
     subject to periodic assessments for impairment by applying a
     fair-value-based test. Intangible assets must be separately recognized and
     amortized over their useful lives. The Company does not expect the adoption
     of SFAS No. 142 (effective, June 1, 2002) to have any impact on its
     consolidated financial statements.

     In August 2001, the Financial Accounting Standards Board issued Statement
     of Financial Accounting Standards (SFAS) No. 144, Accounting for the
     Impairment of Disposal of Long-Lived Assets (SFAS No. 144), which will
     become effective for the Company on June 1, 2002. As applicable to the
     Company, SFAS No. 144 replaces SFAS No. 121, Accounting for the Impairment
     of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and
     provides guidelines on how long-lived assets should be evaluated for
     impairment and establishes criteria for when long-lived assets are held for
     sale, and prescribes the accounting for long-lived assets that will be
     disposed of other than by sale. Unlike SFAS No. 121, an impairment
     assessment under SFAS No. 144 will never result in a write-down of
     goodwill. Rather goodwill will be evaluated for impairment under SFAS No.
     142, Goodwill and Other Intangible Assets. The Company does not expect the
     adoption of SFAS No. 144 to have a material impact on its consolidated
     financial statements, because the impairment assessment under SFAS No. 144
     is largely unchanged from SFAS No. 121.

     In November 2001 the Emerging Issues Task Force reached a consensus on
     Issue 01-14, "Income Statement Characterization of Reimbursements Received
     for `Out-of-Pocket' Expenses Incurred" ("EITF 01-14"), which became
     effective for the Company on March 1, 2002. Under EITF 01-14,
     reimbursements received for out-of-pocket expenses incurred should be
     characterized as revenue in the income statement. Upon adoption of EITF
     01-14, comparative financial statements for prior periods should be
     reclassified to comply with the current presentation. The Company does not
     expect the adoption of EITF 01-14 to have a material impact on its
     consolidated financial statements.



                                     Page 8


<PAGE>




PART I. FINANCIAL INFORMATION

ITEM 2.

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

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

Forward-Looking Statements

Certain statements contained in Management's Discussion and Analysis of
Financial Condition and Results of Operations, including statements concerning
the Company's 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 computer programming consulting services,
the effect of current economic conditions on IT budgets, the concentration of
the Company's business with certain customers and uncertainty as to the
Company's ability to bring in new customers.

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 February 28, 2002 compared with three months ended February
28, 2001

<TABLE>
<CAPTION>

                                                         3 Months Ended
                                                           February 28,
                                                   (Dollar amounts in Thousands)
                                               ------------------------------------------
                                                      2002                   2001
                                               -----------------      -------------------
                                                          % of                    % of
                                               Amount   Revenues      Amount     Revenues
                                               ------   --------      -------    --------
<S>                                             <C>         <C>      <C>           <C>
Revenues ....................................   $12,864     100.0    $19,220       100.0
Cost of sales ...............................    10,185      79.2     15,061        78.3
                                                -------     -----    -------       -----
Gross profit ................................     2,679      20.8      4,159        21.7
Selling, general, and administrative expenses     2,002      15.5      2,840        14.8
                                                -------     -----    -------       -----
Income from operations ......................       677       5.3      1,319         6.9
Other income ................................        59       0.4        119         0.6
                                                -------     -----    -------       -----
Income before income taxes ..................       736       5.7      1,438         7.5
Provision for income taxes ..................       341       2.6        638         3.3
                                                -------     -----    -------       -----
Net income ..................................   $   395       3.1    $   800         4.2
                                                =======     =====    =======       =====
</TABLE>


Revenues

Revenues consist primarily of revenues from computer programming consulting
services. Revenues for the quarter ended February 28, 2002 decreased $6,356,000
or 33.1% from the comparable period in fiscal 2001. This decrease resulted from
an overall decrease in the number of programmers on billing with clients from
approximately 470 at February 28, 2001 to approximately 330 at February 28,
2002. The continuing weak economic environment has significantly reduced the IT
spending levels of many of our major customers, limiting opportunities to place
new consultants on billing.


                                     Page 9


<PAGE>



                           TSR, INC. AND SUBSIDIARIES

The calendar year end budget and planning process at many of our clients
normally results in projects ending at year end, resulting in a reduction in
programmers on billing. In prior years, much of this effect was offset by
consultants starting new projects. This year, however, new starts were down
significantly as a result of the economic condition referred above, resulting in
the number of consultants on billing being reduced. Although the level of
consultants on billing has stabilized, new placements have been concentrated at
one major account. It is still too early to determine if a recovery is
beginning.

The Company's revenues from programmers on billing have also been affected by
discounts required by major customers as a condition to remaining on their
approved vendor lists, such as discounts for prompt payment and volume
discounts. In addition, some major customers have retained a third party 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 and the Company bills the third party and the
third party bills the ultimate customer. This process weakens the relationship
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 do business. These changes have reduced the Company's profit
margins.

Cost of Sales

Cost of sales for the quarter ended February 28, 2002, decreased $4,876,000 or
32.4% to $10,185,000 from $15,061,000 in the prior year period, primarily due to
the reduced revenues discussed above. Cost of sales as a percentage of revenues
increased from 78.3% in the quarter ended February 28, 2001 to 79.2% in the
quarter ended February 28, 2002. This increase is primarily attributable to
customers requiring rate reductions and discounts.

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 $838,000 or 29.5%
from $2,840,000 in the quarter ended February 28, 2001 to $2,002,000 in the
quarter ended February 28, 2002. This decrease was primarily attributable to
lower headcount in our sales, recruiting and administrative staff.

Other Income

Other income resulted primarily from interest and dividend income, which
decreased by $81,000 to $63,000 due to lower yields in the quarter, ended
February 28, 2002. Additionally, the Company also had a net unrealized loss of
$4,000 in the quarter ended February 28, 2002 versus a net unrealized loss of
$25,000 in the quarter ended February 28, 2001 from marketable securities due to
mark to market adjustments of its trading securities equity portfolio. The
balance of $1,000 of other income in the current quarter resulted from the
recognition of the minority interest in the operating losses of a subsidiary.

Income Taxes

The effective income tax rate of 46.3% for the quarter ended February 28, 2002
increased from a rate of 44.4% in the quarter ended February 28, 2001.



                                     Page 10


<PAGE>



                           TSR, INC. AND SUBSIDIARIES


Nine months ended February 28, 2002 compared with nine months ended February 28,
2001.

<TABLE>
<CAPTION>

                                                                   9 Months Ended
                                                                    February 28,
                                                           (Dollar amounts in Thousands)

                                                             2002                   2001
                                                       ------------------     ------------------
                                                                   % of                   % of
                                                        Amount   Revenues     Amount    Revenues
                                                        -------  --------     -------   --------
<S>                                                     <C>       <C>         <C>          <C>
Revenues .........................................     $45,617    100.0       $60,008      100.0
Cost of sales ....................................      35,717     78.3        46,717       77.8
                                                       -------    -----       -------      -----
Gross profit .....................................       9,900     21.7        13,291       22.2

Selling, general, and administrative expenses .....      6,594     14.5         8,442       14.1
                                                       -------    -----       -------      -----
Income from operations ...........................       3,306      7.2         4,849        8.1
Other income .....................................         259      0.6           369        0.6
                                                       -------    -----       -------      -----
Income before income taxes .......................       3,565      7.8         5,218        8.7
Provision for income taxes .......................       1,546      3.4         2,284        3.8
                                                       -------    -----       -------      -----
Net income .......................................     $ 2,019      4.4       $ 2,934        4.9
                                                       =======    =====       =======      =====

</TABLE>

Revenues

Revenues consist primarily of revenues from computer programming consulting
services. Revenues for the nine months ended February 28, 2002 decreased
$14,391,000 or 24.0% from the comparable period in fiscal 2001. This decrease
resulted from an overall decrease in the number of programmers on billing with
clients from approximately 470 at February 28, 2001 to approximately 330 at
February 28, 2002. The continuing weak economic environment has significantly
reduced the IT spending levels of many of our major customers, limiting
opportunities to place new consultants on billing.

The calendar year end budget and planning process at many of our clients
normally results in projects ending at year end, resulting in a reduction in
programmers on billing. In prior years, much of this effect was offset by
consultants starting new projects. This year, however, new starts were down
significantly as a result of the economic condition referred to above, resulting
in the number of consultants on billing being reduced. Although the level of
consultants on billing has recently stabilized, new placements have been
concentrated at one major account. It is still too early to determine if a
recovery is beginning.

The Company's revenues from programmers on billing have also been affected by
discounts required by major customers as a condition to remaining on their
approved vendor lists, such as discounts for prompt payment and volume
discounts. In addition, some major customers have retained a third party 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 and the Company bills the third party and the
third party bills the ultimate customer. This process weakens the relationship
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 do business. These changes have reduced the Company's profit
margins.


                                     Page 11


<PAGE>



                           TSR, INC. AND SUBSIDIARIES

Cost of Sales

Cost of sales for the nine months ended February 28, 2002, decreased $11,000,000
or 23.5% to $35,717,000 from $46,717,000 in the prior year period, primarily due
to the reduced revenues discussed above. Cost of sales as a percentage of
revenues increased from 77.8% in the nine months ended February 28, 2001 to
78.3% in the nine months ended February 28, 2002. This increase is primarily
attributable to customers requiring rate reductions and discounts.

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 $1,848,000 or 21.9%
from $8,442,000 in the nine months ended February 28, 2001 to $6,594,000 in the
nine months ended February 28, 2002. This decrease was primarily attributable to
lower headcount in our sales, recruiting and administrative staff.

Other Income

Other income resulted primarily from interest and dividend income, which
decreased by $90,000 to $262,000 due to lower interest rates on investable funds
in the nine months, ended February 28, 2002. Additionally, the Company also had
a net unrealized gain of $18,000 in the nine months ended February 28, 2001
versus a loss of $4,000 in the nine months ended February 28, 2002 from
marketable securities due to mark to market adjustments of its trading
securities equity portfolio. The balance of $1,000 of other income in the
current period resulted from the recognition of the minority interest in the
operating losses of a subsidiary.

Income Taxes

The effective income tax rate of 43.4% for the nine months ended February 28,
2002 decreased from a rate of 43.8% in the nine months ended February 28, 2001


                                     Page 12


<PAGE>



                           TSR, INC. AND SUBSIDIARIES


Liquidity and Capital Resources

Although the Company's operating results could be negatively impacted by a
continuing decrease in demand for the Company's services, 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 cash requirements.

At February 28, 2002, the Company had working capital of $19,845,000 and cash
and cash equivalents of $6,567,000 as compared to working capital of $17,810,000
and cash and cash equivalents of $6,208,000 at May 31, 2001. Working capital
increased primarily due to the Company's net income of $2,019,000 in the nine
months ended February 28, 2002.

Net cash provided by operating activities amounted to $3,161,000 for the nine
months ended February 28, 2002, compared to $1,800,000 for the nine months ended
February 28, 2001. The improvement in cash provided by operating activities
primarily resulted from improved collections of receivables as compared to the
prior year period, partially offset by a decrease in net income. The comparative
improvement in collections occurred because of temporary slowness in collections
due to system changes at several customers in the prior year nine months.

Net cash used in investing activities amounted to $2,803,000 for the nine months
ended February 28, 2002, compared to $813,000 for the nine months ended February
28, 2001. The increase in net cash flows used in investing activities primarily
resulted from purchases of marketable securities in excess of sales and proceeds
from maturities of marketable securities compared to the prior year period and
the purchase of the net assets of an acquired business in August 2001.

Cash provided by financing activities resulted from the sale of a minority
interest in a subsidiary for $1,000 during the nine months ended February 28,
2002. Cash used in financing activities for the nine months ended February 28,
2001 consisted of purchases of treasury stock amounting to $1,419,000.

The Company's capital resource commitments at February 28, 2002 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 February 28, 2002 follows:

                     FY 02     FY 03     FY 04       FY 05     FY 06    Total
                     -----     -----     -----       -----     -----    -----
Operating Leases .. $95,000  $278,000   $252,000   $ 256,000  $72,000 $ 953,000

The Company's cash and marketable securities were sufficient to enable it to
meet its cash requirements during the nine months ended February 28, 2002. The
Company has available a revolving line of credit of $5,000,000 with a major
money center bank. As of February 28, 2002, no amounts were outstanding under
this line of credit.


                                     Page 13


<PAGE>



                           TSR, INC. AND SUBSIDIARIES

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets"
(SFAS No. 142)", which is effective for fiscal years beginning after June 15,
2001. SFAS No. 142 establishes accounting and reporting standards for goodwill
and intangible assets. Under SFAS No. 142, amortization of goodwill will be
terminated. However, goodwill will be subject to periodic assessments for
impairment by applying a fair-value-based test. Intangible assets must be
separately recognized and amortized over their useful lives. The Company does
not expect the adoption of SFAS No. 142 (effective, June 1, 2002) to have any
impact on its consolidated financial statements.

In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment of
Disposal of Long-Lived Assets (SFAS No. 144), which will become effective for
the Company on June 1, 2002. As applicable to the Company, SFAS No. 144 replaces
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, and provides guidelines on how long-lived
assets should be evaluated for impairment and establishes criteria for when
long-lived assets are held for sale, and prescribes the accounting for
long-lived assets that will be disposed of other than by sale. Unlike SFAS No.
121, an impairment assessment under SFAS No. 144 will never result in a
write-down of goodwill. Rather goodwill will be evaluated for impairment under
SFAS No. 142, Goodwill and Other Intangible Assets. The Company does not expect
the adoption of SFAS No. 144 to have a material impact on its consolidated
financial statements, because the impairment assessment under SFAS No. 144 is
largely unchanged from SFAS No. 121.

In November 2001 the Emerging Issues Task Force reached a consensus on Issue
01-14, "Income Statement Characterization of Reimbursements Received for
`Out-of-Pocket' Expenses Incurred" ("EITF 01-14"), which became effective for
the Company on March 1, 2002. Under EITF 01-14, reimbursements received for
out-of-pocket expenses incurred should be characterized as revenue in the income
statement. Upon adoption of EITF 01-14, comparative financial statements for
prior periods should be reclassified to comply with the current presentation.
The Company does not expect the adoption of EITF 01-14 to have a material impact
on its consolidated financial statements.

Critical Accounting Policies

The Securities and Exchange Commission ("SEC") recently 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, 2001
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.


                                     Page 14


<PAGE>


                           TSR, INC. AND SUBSIDIARIES

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 February 28,
2002, 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.

Part II. Other Information

Item 6. Exhibits and Reports on Form 8K

          (a). 10.1 Employment agreement dated January 1, 2002 between John G.
               Sharkey and TSR, Inc.

          (b). Reports on Form 8K: None

                                   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:  April 4, 2002          /s/ J.F. HUGHES
                             -----------------
                             J.F Hughes, Chairman, President and Treasurer




Date:  April 4, 2002          /s/ JOHN G. SHARKEY
                             ---------------------
                             John G. Sharkey, Vice President Finance



                                     Page 15

<PAGE>




                                 EXHIBIT 10.1 TO
                          QUARTERLY REPORT ON FORM 10Q
                            TSR INC AND SUBSIDIARIES

                              EMPLOYMENT AGREEMENT

     AGREEMENT effective this 1st day of January, 2002 by and between TSR Inc.,
a Delaware corporation, with offices at 400 Oser Avenue, Hauppauge, New York
11788 (hereinafter called the "Corporation") and John G. Sharkey, residing at
xxxxxxxx New York (hereinafter called "Executive").


                              W I T N E S S E T H :

     WHEREAS, the Corporation desires to employ Executive and Executive is
willing to undertake such employment on the terms and subject to the conditions
hereinafter set forth;


     NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties hereto agree as follows:

     1. The Corporation hereby employs Executive as Vice President of Finance
and Controller of the Corporation or such other position as he may be elected or
appointed to by the Corporation's Board of Directors, to perform such
supervisory or executive duties on behalf of the Corporation as the Board of
Directors of the Corporation may from time to time determine.

     2. Executive hereby accepts such employment and agrees that throughout the
period of his employment hereunder, he will devote his full time, attention,
knowledge and skills, faithfully, diligently and to the best of his ability, in
furtherance of the business of the Corporation and to promote the interest of
the Corporation, will perform the duties assigned to him pursuant to Paragraph 1
hereof, subject, at all times, to the direction and control of the Board of
Directors of the Corporation and the Corporation's President. Executive shall at
all times be subject to, observe and carry out such rules and regulations as the
Board of Directors of President of the Corporation or it may from time to time
establish. During the period of Executive's employment hereunder, Executive
shall not be entitled to additional compensation for serving in any office of
the Corporation or any of its subsidiaries to which he is elected, including
without limitation as a director of the Corporation or any of its subsidiaries.

     3. Executive shall be employed for a term of four (4) years commencing as
of the 1st day of January, 2002 and ending on the 31st day of December, 2005
(the "Term"), unless his employment is terminated prior to the expiration of
said four (4) year term pursuant to the provisions hereof.

     4. As full compensation for his services hereunder, the Corporation will
pay to Executive a salary at the rate of One Hundred Twenty-Five Thousand
($125,000) Dollars per annum, payable in equal installments no less frequently
than semi-monthly. The annual salary shall be subject to increase in the
discretion of the President of the Corporation. In addition, Executive shall be
entitled to a discretionary bonus, in an amount determined in good faith by the
President of the Corporation, based on standards relating to the Executive's
performance and the Corporation's performance determined in good faith by the
President of the Corporation. The bonus provided for hereunder shall be payable
by the Corporation to Executive within 30 days of the end of the fiscal year to
which such bonus relates. In addition to such compensation, Executive shall be
entitled to participate, to the extent he is eligible under the terms and
conditions thereof, in any pension, profit-sharing, retirement, hospitalization,
insurance medical services, or other employee benefit plan generally available
to executives of the Corporation which may be in effect from time to time during
the period of his employment hereunder. The Corporation shall be under no
obligation to institute or continue the existence of any such employee benefit
plan. Employee shall also continue to be entitled to a leased car comparable to
the car which he is currently provided. Executive shall be entitled to four
weeks of paid vacation for each year.

                                     Page 16


<PAGE>




     5. The Corporation shall reimburse Executive for all expenses reasonably
incurred by him in connection with the performance of his duties hereunder and
the business of the Corporation, upon the submission to the Corporation of
appropriate vouchers therefor and approval thereof by the President of the
Corporation; provided, however, that no reimbursement has been made by the
Corporation for expenses substantially disallowed, Executive shall reimburse the
Corporation for any such amounts. Such reimbursements shall be subject to the
expense reimbursement policies of the Corporation which are in effect from time
to time.

     6. Notwithstanding any provision contained herein to the contrary, the
Corporation may terminate Employee's employment hereunder at any time for
?Cause? as such term has been interpreted pursuant to the decisions of the
courts of the State of New York which have interpreted the meaning for Cause
for justifiable termination pursuant to employment arrangements generally. The
Corporation may terminate such employment without Cause at any time; provided
however, the Corporation shall continue to pay the Employee his base
compensation, which shall not exceed the rate of $125,000 per annum, during the
balance of the term. In the event of a termination of Employee's employment
Employee shall be eligible to continue to receive, at the Company's expense, all
benefits provided by the Corporation as enumerated in Paragraph 4, above.


     7. CHANGE IN CONTROL. (a) Executive shall have the right to terminate his
employment hereunder following a Change in Control. If Executive elects to
terminate his employment hereunder, he shall do so by written notice given
within 90 days after the event constituting a Change in Control.

          (b) For purposes of this Agreement "Change in Control" shall mean that
     any of the following events has occurred:

               (i)  An acquisition (other than directly from the Corporation) of
                    any voting securities of the Corporation (treating all
                    classes of outstanding voting securities or other securities
                    convertible into voting securities as if they were converted
                    into voting securities) (the "VOTING SECURITIES") by any
                    "person", "entity" or "group of affiliated persons" (as such
                    terms are used for purposes of Section 13(d) or 14(d)
                    (collectively, "PERSONS") of the Securities Exchange Act of
                    1934, as amended (the "1934 Act") (other than Joseph Hughes
                    or a group which includes Joseph Hughes) immediately after
                    which such Person has "Beneficial Ownership" (within the
                    meaning of Rule 13d-3 promulgated under the 1934 Act and
                    irrespective of any vesting or waiting periods) of twenty
                    (20%) percent or more of the combined voting power of the
                    Corporation's then outstanding Voting Securities; unless
                    immediately after such acquisition Joseph Hughes
                    beneficially owns a greater percentage of the Voting
                    Securities than such Persons.

               (ii) An acquisition of any voting securities of the corporation
                    (treating all classes of outstanding voting securities or
                    other securities convertible into voting securities as if
                    they were converted into voting securities) (the "VOTING
                    SECURITIES" by any person, entity or group of
                    affiliated persons (as such terms are used for purposes of
                    Section 13(d) or 14(d) (collectively, "PERSONS") of the
                    Securities Exchange Act of 1934, as amended (the "1934
                    Act") ( other than Joseph Hughes or a group which includes
                    Joseph Hughes) immediately after which such Person has
                    "Beneficial Ownership" ( within the meaning of Rule 13d-3
                    promulgated under the 1934 Act and irrespective of any
                    vesting or waiting periods) of a greater percentage of the
                    Voting Securities than Joseph Hughes, if within six months
                    thereafter the individuals who were members of the Board of
                    Directors immediately prior to such acquisition or the
                    initial agreement relating to such acquisition no longer
                    constitute at least a majority of the members of the Board
                    of Directors of the Company.

              (iii) A merger, consolidation or reorganization involving the
                    Corporation or a sale of all or substantially all of the
                    assets of the Corporation, unless

                                     Page 17


<PAGE>



                    (A) the shareholders of the Corporation, immediately before
               such merger, consolidation or reorganization, own, directly or
               indirectly, immediately following such merger, consolidation or
               reorganization, more than fifty (50%) percent of the combined
               voting power of the outstanding Voting Securities of the entity
               resulting from such merger or consolidation or reorganization or
               sale of all or substantially all of the assets (the "SURVIVING
               ENTITY") in substantially the same proportion as their ownership
               of the Voting Securities immediately before such merger,
               consolidation or reorganization or sale of all or substantially
               all of the assets, and

                    (B) the individuals who were members of the Board of
               Directors immediately prior to the execution of the agreement
               providing for such merger, consolidation or reorganization or
               sale of all or substantially all of the assets constitute at
               least a majority of the members of the board of directors of the
               Surviving Entity or an entity beneficially owning, directly or
               indirectly, a majority of the Voting Securities of the Surviving
               Entity, and

                    (C) no Person (other than the Corporation, any subsidiary,
               any employee benefit plan (or any trust forming a part thereof)
               maintained by the Corporation, the Surviving Entity or any
               subsidiary, or any Person who, immediately prior to such merger,
               consolidation or reorganization or sale of all or substantially
               all of the assets had Beneficial Ownership of thirty (30%)
               percent or more of the then outstanding Voting Securities) owns,
               directly or indirectly, thirty (30%) percent or more of the
               combined voting power of the Surviving Entity's then outstanding
               Voting Securities.

          (iv) A complete liquidation or dissolution of the Corporation.

          (v)  There has been a public announcement of a Change in Control of
               the Corporation (provided, however, that consummation of the
               Change in Control of the Corporation shall be a condition
               precedent to the effectiveness of this provision) and at any time
               thereafter the employment of the Executive under this Agreement
               is terminated for any reason whatsoever;

          (c) Notwithstanding the foregoing, a Change in Control shall not be
     deemed to occur solely because any Person (the "SUBJECT PERSON") acquired
     Beneficial Ownership of more than the permitted amount of the outstanding
     Voting Securities as a result of the acquisition of Voting Securities by
     the Corporation which, by reducing the number of Voting Securities
     outstanding, increases the proportional number of shares Beneficially Owned
     by the Subject Person, provided that if a Change in Control would occur
     (but for the operation of this sentence) as a result of the acquisition of
     Voting Securities by the Corporation, and after such share acquisition by
     the Corporation, the Subject Person becomes the Beneficial Owner of any
     additional Voting Securities which increases the percentage of the then
     outstanding Voting Securities Beneficially Owned by the Subject Person,
     then a Change in Control shall occur.

          (d) If Employee's employment is terminated pursuant to this Section,
     the Corporation shall pay to the Executive (i) his full salary at the rate
     then in effective through the date of termination and plus an amount equal
     to the annual salary payable hereunder at the rate then in effect and (ii)
     and an amount equal to the pro rata portion of the bonus to which Executive
     is entitled for the then current year (based on the portion of the year
     through the date of termination) through the date of termination or if such
     amount cannot be determined, the pro rata portion of the bonus paid for the
     preceding year through the date of termination plus an amount equal to the
     bonus payable for a one year period based on the annual bonus payable for
     the then current year, or if such amount cannot be determined, the amount
     of the bonus paid for the prior year. In addition, the Company will
     continue to provide and to Executive, at the Company's expense, all
     benefits as enumerated in Paragraph 4 above for a period of one year.

                                     Page 18


<PAGE>




     8. The Corporation and Employee are simultaneously herewith entering into a
Maintenance of Confidence and Non-Compete Agreement, the terms of which are
hereby expressly incorporated into this Agreement, provided, however, that the
Maintenance of Confidence and Non-Compete Agreement shall continue to be
effective notwithstanding any termination of Employee's employment hereunder and
shall continue in effect upon expiration of this Employment Agreement pursuant
to the terms of the Maintenance of Confidence and Non-Compete Agreement.

     9. In the event of Executive's death during the Term, this Agreement shall
terminate immediately, and Executive's legal representatives shall be entitled
to receive the salary due Executive through the last day of the calendar month
during which his death shall have occurred.

     10. If, during the Term, Executive is unable to perform his duties
hereunder on account of illness, accident or other physical or mental incapacity
and such illness or other incapacity shall continue for a period of six (6)
consecutive months or an aggregate of one hundred and eighty (180) days in any
consecutive twelve (12) month period, the Corporation shall have the right, on
fifteen (15) days written notice (given after such period) to Executive, to
terminate this Agreement. In such event, the Corporation shall be obligated to
pay to Executive his compensation only to the end of the calendar month in which
such termination occurs. However, if prior to the date specified in such notice,
Executive's illness or incapacity shall have terminated and he shall have taken
up the performance of his duties hereunder, Executive shall be entitled to
resume his employment hereunder, as though such notice had not been given.

     11. (a) The Corporation shall have the right from time to time to purchase,
increase, modify or terminate insurance policies on the life of Executive for
the benefit of the Corporation, in such amounts as the Corporation shall
determine in its sole discretion

          (b) In connection with paragraph 11(a) above, Executive shall, at such
     time or times and at such place or places as the Corporation may reasonable
     direct, submit himself to such physical examinations and executive and
     deliver such documents as the Corporation may deem necessary or desirable.

     12. Confidentiality. Executive acknowledges that, through his status as
Vice President, Finance and Controller of the Corporation, and will have,
possession of Confidential Information (as defined herein) as to the business of
the Corporation. Executive agrees that all such Confidential Information
constitutes a vital part of the business of the Corporation and its affiliates
and is by its nature trade secrets and confidential information proprietary to
the Corporation and its affiliates. Executive agrees that he shall not divulge,
communicate, furnish or make accessible (whether orally or in writing or in
books, articles or any other medium to any individual, firm, partnership,
corporation or other entity or person, any knowledge or information with respect
to Confidential Information directly or indirectly relating to the business of
the Corporation or any of its affiliates. The term "Confidential Information"
shall mean any information not generally known in the relevant trade or
otherwise not generally available to the public, which was obtained from the
Corporation or which was learned, discovered, developed, conceived, originated
or prepared during or as a result of the performance of any services by
Executive on behalf of the Corporation.

     13. The parties hereto acknowledge that Executive's service are unique and
that, in the event of a breach of Executive of any of his obligations under this
Agreement, the corporation will not have an adequate remedy at law. Accordingly,
in the event of any such breach of threatened breach by Executive, the
Corporation shall be entitled to such equitable and injunctive relief as may be
available to restrain the Executive participating in such breach of threatened
breach from the violation of the provisions thereof. Nothing herein shall be
construed as prohibiting the Corporation from pursuing any other remedies at law
or in equity for such breach or threatened breach, including the recovery of
damages and the immediate termination of the employment of Executive hereunder.


     14. This Agreement together with the Maintenance of Confidence and
Non-Compete Agreement executed on the same date hereof, constitute the entire
agreement of the parties hereto and no amendment or modification hereof shall be
valid or binding unless made in writing and signed by the party against whom
enforcement thereof is sought.


                                     Page 19


<PAGE>




     15. Any notice required, permitted or desired to be given pursuant to any
of the provisions of this Agreement shall be deemed to have been sufficiently
given or served for all purposes if delivered in person or sent by certified
mail, return receipt requested, postage and fees prepaid as follows:

          If to the Corporation at:

          Chairman of the Board
          TSR, Inc.
          400 Oser Avenue
          Hauppauge, New York 11788

          With a copy to:

          Steven A. Fishman, Esq.
          Proskauer Rose LLP
          1585 Broadway
          New York, NY 10036

          If to the Executive at:
          Mr. John Sharkey
          xxxxxxxxxxx
          xxxxxxxxxxx

Either of the parties hereto may at any time and from time to time change the
address to which notice shall be sent hereunder by notice to the other party
given under this paragraph 15. The date of the giving of any notice sent by mail
shall be the date of the posting of the mail.

     16. Neither this Agreement nor the right to receive any payments hereunder
may be assigned by Executive. This Agreement shall be binding upon Executive,
his heirs, executors and administrators and upon the Corporation, its successors
and assigns.

     17. No course of dealing nor any delay on the part of the Corporation in
exercising any rights hereunder shall operate as a waiver of any such rights. No
waiver of any default or breach of this Agreement shall be deemed a continuing
waiver or a waiver of any other breach or default.

     18. This Agreement shall be governed, interpreted and construed in
accordance with the laws of the State of New York applicable to agreements
entered into and to be performed entirely therein.

     19. If any clause, paragraph, section of part of this Agreement shall be
held or declared to be void, invalid or illegal, for any reason, by any court of
competent jurisdiction, such provision shall be ineffective but shall not in any
way invalidate or affect any other clause, paragraph, section or part of this
Agreement.

     20. Employee acknowledges that he is not subject to any agreement which
would in any way restrict him from carrying out his employment as contemplated
hereunder.

     21. This agreement supersedes any prior employment agreement.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day in year first above written.


                                            TSR, INC.

                                            By:     /s/ J.F. HUGHES
                                                   -----------------------------
                                                   Name: J.F. Hughes
                                                   Title: President


                                                    /s/ JOHN G. SHARKEY
                                                   -----------------------------
                                                        John G. Sharkey


                                     Page 20